Shareholders' Group Takes Aim At Anti-takeover Provisions

Hostile takeovers might seem to be yesterday's issue. But publicly traded corporations in Connecticut and across the nation have not heard the last of it.

Many of the companies that eluded the takeover sharks of the 1980s did so by erecting barriers of anti-takeover measures, often with the help of state governments. But those fortifications are coming under attack.

The 5-year-old United Shareholders Association, founded by corporate raider T. Boone Pickens and based in Washington, is calling on American corporations to revoke measures designed to thwart takeovers or otherwise insulate management from market forces.

The group last week announced it has targeted 41 major U.S. companies, including three in Connecticut, in a "shareholder rights" campaign. Its targets in Connecticut are The Stanley Works of New Britain, Union Carbide Corp. of Danbury and Pittston Co. of Stamford.

All three companies strongly defended their policies. But they also said they want to be responsive to their stock owners.

"We have been considering a number of measures for the benefit of our shareholders," said Ronald F. Gilrain, vice president of public affairs for Stanley Works. "Some of [the association's] concerns may be addressed by some of the proposals we're considering." David Gitlitz, director of communications and research for the United Shareholders Association, said that despite the Pickens connection, most dues-paying members of the organization are individual stock owners. Also represented are institutional investors, he said.

Gitlitz said association members share a conviction that management should be more accountable to shareholders and that shareowner value -- not management protection or executive compensation -- should be a corporation's top priority.

In particular, the group objects to executive pay not tied to financial performance or stockholder return; requirements that shareholders sign their ballots on proxy votes, increasing the clout of management; "golden parachutes" that guarantee handsome severance benefits to senior executives in the event of a takeover;

"poison pills" designed to dilute the value of a company's stock in the event of an unwanted takeover bid; and state laws in Connecticut and elsewhere that help to shield companies from hostile bids.

"The best defense against a takeover should be the performance of a company's senior management," Gitlitz said. "If management is making the most productive use of its assets and generating the maximum value to shareholders, no one's going to want to take them over." There have been relatively few high-profile takeovers in the past few years. When the bottom fell out of the junk-bond market in the late 1980s, leaving much of Wall Street in recession, financing options dried up for would-be raiders.

The focus of shareholders' groups more recently has been executive pay. Under pressure from the United Shareholders Association, for example, the compensation committee of ITT Corp. -- parent company of the ITT Hartford Insurance Group -- last month agreed to recommend that the ITT board reform the company's executive compensation program.

In exchange for tying compensation to shareholder returns, the association said it would drop ITT from the roster of companies targeted in its shareholder-rights campaign.

Still targeted by the group for their executive-pay policies, however, are B.F. Goodrich Co. of Akron, Ohio, and UAL Corp., Elk Grove Village, Ill., parent company of United Airlines.

The three Connecticut-based corporations -- Stanley Works, Union Carbide and Pittston -- are all targeted by the association for their anti-takeover policies. All have approved poison pills and golden parachutes during the past five or six years, and only Pittston has confidential balloting on proxy votes.

The association also objects to Connecticut's "five-year freezeout" law -- similar to other states' laws -- that prevents a hostile suitor of a company based in the state to take control of the management for five years. Connecticut's law was passed in 1988 at the height of the takeover boom.

In the next several weeks, Gitlitz said, members of the association who own shares in targeted companies will submit proposals to be included in the proxy statements for companies' annual meetings in the spring. The proposals will seek to revoke the related measures, he said.

The past few years have seen a surge of shareholder activism at annual meetings. Traditional gadflies have been joined by social-responsibility advocates concerned about the environment, justice in South Africa and other causes, and by investor groups, such as the United Shareholders Association, concerned with corporate governance issues.